As a public accounting firm, we see firsthand the challenges businesses and individuals face at tax time. The filing process can be complex and time-consuming, and even the smallest mistake can have costly consequences. Moreover, many clients wait until the last minute to schedule an appointment with their accountant, gather necessary tax documents, and file their returns. We’re feeling anxious just thinking about it!
But we can all do better. Getting ahead—even a year ahead—is all it takes to ensure smooth sailing at tax time so you can save time, money, and a whole lot of stress. Follow these seven steps to make your life (and your accountant’s) easier next spring.
Create a tax calendar.
First things first: Identify the deadlines relevant to your tax situation. For individuals and small businesses, the filing deadline will be Monday, April 15, 2024. The deadline for partnerships, multi-member businesses, LLCs, and S-Corps will be March 15, 2024.
From there, identify other key dates you’ll need to have on your radar, such as due dates for quarterly estimated tax payments, extension deadlines, and when you can expect to receive the forms you’ll need for filing. For example, you’ll likely receive 1099 forms, which are used to report all non-employment income, in February. Pop these dates onto your calendar now, and block time each month or quarter to take care of tax-related tasks.
While you’re at it, take note of other reporting requirements that you may need to comply with in addition to filing income tax returns.
As the year ends, keep an eye out for Perkins & Co’s 2023 end-of-year tax planner, which is typically published at the beginning of December. Check out last year’s planning guide to get a feel for the information we’ll share with businesses and individuals.
Keep immaculate financial records.
Keep all your important tax documents in one place. This includes items like receipts, records of any interest or investment income, and documentation of business expenses that may reduce your taxable income. You can use a tax organizer to help you keep track of your documents—your accountant may supply you with one, or you can find plenty of options online.
Make sure last year’s return becomes part of your recordkeeping. Comparing last year’s entries to this year’s can help you identify patterns or trends. Think back to conversations with your accountant while they were preparing last year’s tax return. If your tax preparer got hung up on a particular part of your return, think about how you can get out ahead of the issue for next year.
If you’re a business, aim to close your books in January, not March or April. Give yourself a firm deadline. When your finances are buttoned up, it helps you avoid penalties and fines resulting from missing deadlines or failing to report income correctly. It can also help you identify areas where you can save money and maximize your return.
Stay on top of the latest federal and state tax changes.
The tax code is constantly changing, and it’s important to stay up to date on the rules and regulations that pertain to your business, industry, geography, or personal situation. Read IRS publications and local business journals. Talk to your accountant or tax professional and follow along with their blog posts, email newsletters, and social media posts. Engage with industry connections and thought leaders. If you keep your eyes and ears open for relevant information, you’ll spare yourself surprises and have ample lead time to prepare for changes happening at local, state, and federal levels.
Explore tax credits and deductions.
The list of business tax credits and deductions available to individuals and businesses is extensive and always evolving. There may be credits you don’t know about, like those related to following environmentally friendly business practices or offering specific benefits like childcare. If you think you may qualify for a deduction or credit, talk to your tax preparer. It never hurts to ask, and these are conversations that can happen before the busy tax season.
Itemize your business expenses and account for all sources of income.
Itemizing and categorizing your business expenses year-round will save you some serious time come tax season. Work closely with your bookkeeper or accountant to set up a system for tracking expenses and all income sources. This could be a simple spreadsheet or a more sophisticated accounting software program.
Individuals should keep track of their mileage if they use their cars for business purposes. They should also save receipts for charitable donations and track educational expenses if they have children in college.
Schedule a meeting with your tax professional early.
Meet with your tax professional three to four months before tax season. Not only will they be up to date on any changes in tax laws that may affect your filing, but they can also help identify what information, forms, and other documentation you need to file your taxes correctly.
When you wait until the last minute, it’s easier to make errors or inaccurately report areas of your income, which you could end up paying for your tax professional to fix when deadlines are looming next spring.
Plan for more than 2024
If you’re a business owner who is feeling good about your tax plan for the year ahead, consider big-picture changes that could reduce your tax obligations in the future. Explore alternative legal entity structures to minimize your total tax liability and enterprise risk. Perform a cost segregation study with respect to investments in buildings or renovation of real property to accelerate taxable deductions, claim qualifying bonus depreciation, and identify other discretionary incentives to reduce or defer various taxes. Finally, evaluate co-sourcing or outsourcing arrangements to assist with priority projects as part of an overall tax function transformation.
Want to get the ball rolling on next year’s tax prep? Our accountants are emerging from busy season and ready to help you plan for the year ahead.